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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15950
FIRST BUSEY CORPORATION
(Exact name of registrant as specified in its Charter)
Nevada 37-1078406
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
201 West Main Street
Urbana, Illinois 61801
------------------------------- -------------------
(Address of principal (Zip Code)
executive offices)
(217) 365-4513
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 25, 2002, the aggregate market value of the Common Stock
held by non-affiliates was $144,451,394. The market value of the Common Stock
is based on the closing price for such stock as reported on the Nasdaq National
Market on that date. Affiliates include all directors, executive officers and
beneficial holders owning 5% or more of the shares.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 25, 2002
- ------------------------------- --------------------------------
Common Stock, without par value 13,667,888
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated March 15, 2002 for First
Busey Corporation's Annual Meeting of Stockholders to be held April 15, 2002,
(the "2002 Proxy Statement") are incorporated by reference into Part III.
1
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FIRST BUSEY CORPORATION
Form 10-K Annual Report
Table of Contents
PART 1
Item 1 Business 4
Item 2 Properties 7
Item 3 Legal Proceedings 8
Item 4 Submission of Matters to a Vote of Security Holders 8
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters 9
Item 6 Selected Financial Data . 10
Item 7 . Management's Discussion and Analysis of Financial Condition and Results of Operations
11
Item 7A Quantitative and Qualitative Disclosures About Market Risk 26
Item 8 Financial Statements and Supplementary Data 26
Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
26
PART III
Item 10 Directors and Executive Officers of the Registrant 27
Item 11 Executive Compensation . 27
Item 12 Security Ownership of Certain Beneficial Owners and Management 27
Item 13 Certain Relationships and Related Transactions . 27
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 28
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PART I
ITEM 1. BUSINESS
INTRODUCTION
First Busey Corporation ("First Busey"), a Nevada Corporation, is a $1.3
billion financial holding company which was organized as a bank holding company
in 1980. First Busey conducts a broad range of financial services through its
banking and non-banking subsidiaries at 21 locations. First Busey is
headquartered in Urbana, Illinois and its stock is traded on the Nasdaq National
Market under the symbol "BUSE."
BANKING AND NON-BANKING SUBSIDIARIES
First Busey currently has two wholly owned banking subsidiaries located in
three states (the "Banks"). Busey Bank, a state-chartered bank organized in
1868, is a full service commercial bank offering a wide variety of services to
individual, business, institutional and governmental customers, including retail
products and services. Busey Bank has 18 locations in Illinois and one in
Indianapolis, Indiana.
First Busey acquired Eagle BancGroup, Inc., parent of First Federal Savings
& Loan Association ("First Federal"), in October, 1999. First Federal, located
in Bloomington, Illinois, was established in 1919 as a federally chartered
capital stock savings association. In June, 2000, First Federal changed its
name to Busey Bank fsb. At the same time, four of Busey Bank's branches,
located in LeRoy and Bloomington, Illinois, were transferred into Busey Bank
fsb. In October, 2000, Busey Bank fsb opened an additional branch in Fort
Myers, Florida. In November, 2001, Busey Bank fsb transferred its charter to
Florida, and changed its name to Busey Bank Florida. Simultaneously, the
Illinois assets of Busey Bank fsb were merged into Busey Bank. Busey Bank
Florida, a federally chartered savings association, is a full service bank
offering commercial and retail banking services. Busey Bank Florida has one
location in Fort Myers, Florida.
The Banks offer a full range of banking services, including commercial,
financial, agricultural and real estate loans, and retail banking services,
including accepting customary types of demand and savings deposits, making
individual, consumer, installment, first mortgage and second mortgage loans,
offering money transfers, safe deposit services, IRA, Keogh and other fiduciary
services, automated banking and automated fund transfers.
Busey Investment Group, Inc., located in Champaign, Illinois and formed in
February, 1999, is the parent company of: (1) First Busey Trust & Investment
Co., organized in January, 1987, which is exclusively dedicated to providing a
full range of trust and investment management services, including farm
management, estate and financial planning, tax preparation, custody services and
philanthropic advisory services; (2) First Busey Securities, Inc., organized in
April, 1991, which is a full service broker/dealer and provides individual
investment advice; and (3) Busey Insurance Services, Inc., organized in October,
1997, which offers a variety of insurance products.
First Busey Resources, Inc., located in Urbana, Illinois, owns and manages
Busey Plaza, a professional office building that is fully leased to unaffiliated
tenants.
First Busey Capital Trust I ("Capital Trust I"), a statutory business trust
organized under the Delaware Business Trust Act, was formed in June, 2001.
First Busey owns all of the Common Securities of Capital Trust I. First Busey
and Capital Trust I jointly filed a registration statement reflecting the
registration of $22 million of 9.00% Cumulative Trust Preferred Securities
issued by Capital Trust I and guaranteed by First Busey. The entire $22 million
issue, as well as a $3 million over-allotment, were sold in June, 2001.
4
COMPETITION
The Banks compete actively with national and state banks, savings and loan
associations and credit unions for deposits and loans primarily in central and
east-central Illinois, southwest Florida, and central Indiana. In addition,
First Busey and its non-bank subsidiaries compete with other financial
institutions, including asset management and trust companies, security
broker/dealers, personal loan companies, insurance companies, finance companies,
leasing companies, mortgage companies and certain governmental agencies, all of
which actively engage in marketing various types of loans, deposit accounts and
other products and services.
Based on information obtained from FDIC/OTS Summary of Deposits dated June,
2001, First Busey ranked first in total deposits in the combined markets of
Champaign, McLean and Ford Counties. Customers for banking services are
generally influenced by convenience, quality of service, personal contacts,
price of services and availability of products. Although the market share of
First Busey varies in different markets, First Busey believes that its
affiliates effectively compete with other banks, thrifts and financial
institutions in their relevant market areas.
SUPERVISION, REGULATION AND OTHER FACTORS
GENERAL
First Busey is a financial holding company subject to supervision and
regulation by the Board of Governors of the Federal Reserve System ("Federal
Reserve") under the Bank Holding Company Act ("BHCA"), and by the Illinois Bank
Holding Company Act ("IBHCA"). First Busey's state-chartered bank is subject to
regulation and examination primarily by the State of Illinois Office of Banks
and Real Estate ("SIOBRE") and, secondarily, by the Federal Deposit Insurance
Corporation ("FDIC"). First Busey's federally chartered capital stock savings
association is subject to regulation and examination primarily by the Office of
Thrift Supervision ("OTS") and, secondarily, by the FDIC. Numerous other
federal and state laws, as well as regulations promulgated by the Federal
Reserve, SIOBRE, FDIC and OTS govern almost all aspects of the operations of the
Banks. Various federal and state bodies regulate and supervise First Busey's
non-banking subsidiaries including its brokerage, investment advisory and
insurance agency operations. These include, but are not limited to, SIOBRE,
Federal Reserve, Securities and Exchange Commission, National Association of
Securities Dealers, Inc., Illinois Department of Insurance, federal and state
banking regulators and various state regulators of insurance and brokerage
activities.
RECENT LEGISLATION
On November 12, 1999, former President Clinton signed into law legislation
that allows bank holding companies to engage in a wider range of non-banking
activities, including greater authority to engage in securities and insurance
activities. Under the Gramm-Leach-Bliley Act (the "Act"), a bank holding
company that elects to become a financial holding company may engage in any
activity that the Federal Reserve, in consultation with the Secretary of the
Treasury, determines by regulation or order is: (1) financial in nature; (2)
incidental to any such financial activity; or (3) complementary to any such
financial activity and does not pose a substantial risk to the safety or
soundness of depository institutions or the financial system generally. This
Act makes significant changes in U.S. banking law, principally by repealing
certain restrictive provisions of the 1933 Glass-Steagall Act. The Act
specifies certain activities that are deemed to be financial in nature,
including lending, exchanging, transferring, investing for others, or
safeguarding money or securities; underwriting and selling insurance; providing
financial, investment, or economic advisory services; underwriting, dealing in
or making a market in, securities; and any activity currently permitted for bank
holding companies by the Federal Reserve under Section 4(c)(8) of the BHCA. The
Act does not authorize banks or their affiliates to engage in commercial
activities that are not financial in nature. A bank holding company may elect
to be treated as a financial holding company only if all depository institution
subsidiaries of the holding company are well-capitalized, well-managed and have
at least a satisfactory rating under the Community Reinvestment Act. First
Busey became a financial holding company in May, 2000.
5
In addition to the Act, there have been a number of legislative and
regulatory proposals that would have an impact on bank/financial holding
companies and their bank and non-bank subsidiaries. It is impossible to predict
whether or in what form these proposals may be adopted in the future and if
adopted, what their effect will be on First Busey.
DIVIDENDS
The Federal Reserve has issued a policy statement on the payment of cash
dividends by financial holding companies. In the policy statement, the Federal
Reserve expressed its view that a bank holding company experiencing weak
earnings should not pay cash dividends in excess of its net income or which
could only be funded in ways that would weaken its financial health, such as by
borrowing. First Busey is also subject to certain contractual and regulatory
capital restrictions that limit the amount of cash dividends that First Busey
may pay. The Federal Reserve also may impose limitations on the payment of
dividends as a condition to its approval of certain applications, including
applications for approval of mergers and acquisitions.
The primary sources of funds for First Busey's payment of dividends to its
shareholders are dividends and fees to First Busey from its banking and
nonbanking affiliates. Various federal and state statutory provisions and
regulations limit the amount of dividends that the subsidiary banks of First
Busey may pay. Under provisions of the Illinois Banking Act ("IBA"), dividends
may not be declared by banking subsidiaries except out of the bank's net profit
(as defined), and unless the bank has transferred to surplus at least one-tenth
of its net profits since the date of the declaration of the last preceding
dividend, until the amount of its surplus is at least equal to its capital.
Federal and state banking regulations applicable to First Busey and its
banking subsidiaries require minimum levels of capital, which limit the amounts
available for payment of dividends.
CAPITAL REQUIREMENTS
First Busey is required to comply with the capital adequacy standards
established by the Federal Reserve, and its banking subsidiaries must comply
with similar capital adequacy standards established by the OTS, FDIC, and
SIOBRE, as applicable. There are two basic measures of capital adequacy for
financial holding companies and their banking subsidiaries that have been
promulgated by the Federal Reserve and the FDIC: a risk-based measure and a
leverage measure. All applicable capital standards must be satisfied for a bank
holding company or a bank to be considered in compliance.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
substantial additional restrictions can be imposed upon FDIC insured depository
institutions that fail to meet applicable capital requirements. See "Prompt
Corrective Action."
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system the federal banking
regulators are required to rate supervised institutions on the basis of five
capital categories (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized) and to take
certain mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Pursuant to FDICIA, the Federal Reserve, the FDIC, and the OTS have adopted
regulations setting forth a five-tier scheme for measuring the capital adequacy
of the financial institutions they supervise. Under the regulations, an
institution would be placed in one of the following capital categories: (i) well
6
capitalized (an institution that has a Total Capital ratio of at least 10%, a
Tier 1 Capital ratio of at least 6% and a Tier 1 Leverage Ratio of at least 5%);
(ii) adequately capitalized (an institution that has a Total Capital ratio of at
least 8%, a Tier 1 Capital ratio of at least 4% and a Tier 1 Leverage Ratio of a
least 4%); (iii) undercapitalized (an institution that has a Total Capital ratio
of under 8%, a Tier 1 Capital ratio of under 4% or a Tier 1 Leverage Ratio of
under 4%); (iv) significantly undercapitalized (an institution that has a Total
Capital ratio of under 6%, a Tier 1 Capital ratio of under 3% or a Tier 1
Leverage Ratio of under 3%); and (v) critically undercapitalized (an institution
whose tangible equity is not greater than 2% of total tangible assets). The
regulations permit the appropriate federal banking regulator to downgrade an
institution to the next lower category if the regulator determines (i) after
notice and opportunity for hearing or response, that the institution is in an
unsafe or unsound condition or (ii) that the institution has received (and not
corrected) a less-than-satisfactory rating for any of the categories of asset
quality, management, earnings or liquidity in its most recent examination.
Supervisory actions by the appropriate federal banking regulator depend upon an
institution's classification within the five categories. First Busey's
management believes that First Busey and its significant bank subsidiaries have
the requisite capital levels to qualify as well capitalized institutions under
the FDICIA regulations.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. Federal banking agencies may not accept a capital
plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
EMPLOYEES
As of December 31, 2001, First Busey and its subsidiaries had a total of
498 employees (full-time equivalents).
ITEM 2. PROPERTIES
The location and general character of the materially important physical
properties of First Busey and its subsidiaries are as follows: First Busey,
where corporate management and administration operate, is headquartered at 201
West Main Street, Urbana, Illinois. Busey Bank has properties located at 201
West Main Street, Urbana, Illinois, 909 West Kirby Avenue, Champaign, Illinois,
and 301 Fairway Drive, Bloomington, Illinois. These facilities offer commercial
banking services, including commercial, financial, agricultural and real estate
loans, and retail banking services, including accepting customary types of
demand and savings deposits, making individual, consumer, installment, first
mortgage and second mortgage loans. Busey Bank Florida, located at 7980
Summerlin Lakes Drive, Fort Myers, Florida, offers similar services as Busey
Bank. Busey Investment Group, Inc., located at 502 West Windsor Road,
Champaign, Illinois, through its subsidiaries, provides a full range of trust
and investment management services, execution of securities transactions as a
full-service broker/dealer and provide individual investment advice on equity
and other securities as well as insurance agency services. First Busey
Resources, Inc., located at 102 East Main Street, Urbana, Illinois, owns and
manages Busey Plaza, which is fully leased to unaffiliated tenants.
First Busey and its subsidiaries own or lease all of the real property
and/or buildings on which each respective entity is located.
7
ITEM 3. LEGAL PROCEEDINGS
As part of the ordinary course of business, First Busey and its
subsidiaries are parties to litigation that is incidental to their regular
business activities.
There is no material pending litigation in which First Busey or any of its
subsidiaries is involved or of which any of their property is the subject.
Furthermore, there is no pending legal proceeding that is adverse to First Busey
in which any director, officer or affiliate of First Busey, or any associate of
any such director or officer, is a party, or has a material interest.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective October 1, 1998, First Busey Common Stock began trading on
the Nasdaq National Market under the symbol "BUSE". Although a limited trading
market for shares of First Busey Common Stock has developed recently, there can
be no assurance that it will continue.
The following table presents for the periods indicated the high and
low closing price for First Busey common stock as provided by the Corporation's
market maker Stephens, Inc., Little Rock, Arkansas, and reported on the Nasdaq
National Market.
2001 2000
-------------- --------------
Market Prices of Common Stock High Low High Low
- ----------------------------- ------ ------ ------ ------
First Quarter $20.50 $17.81 $23.00 $18.50
Second Quarter $21.50 $19.69 $21.44 $16.38
Third Quarter $22.00 $18.50 $22.50 $16.75
Fourth Quarter $22.00 $19.00 $20.44 $16.75
During 2001 and 2000, First Busey, declared cash dividends per share of common
stock as follows:
2001 COMMON STOCK
---- ------------
January $ .13
April $ .13
July $ .13
October $ .13
2000
----
January $ .12
April $ .12
July $ .12
October $ .12
All issued and outstanding shares of Class B Common Stock were converted to
Class A Common Stock on December 31, 1997. A three-for-two stock split on both
Class A and Class B Common Stock occurred on May 7, 1996. In April, 1998,
shareholders approved Restated Articles of Incorporation which authorized just
one class of stock to be referred to only as "Common Stock," thus eliminating
the "Class A" designation. A two-for-one stock split on Common Stock occurred
on August 3, 1998.
For a discussion of restrictions on dividends, please see the discussion of
dividend restrictions under Item 1, Business, Dividends on page 6.
As of February 25, 2002, there were approximately 945 holders of First
Busey Common Stock.
9
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected financial data for each of the five years in the
period ended December 31, 2001, have been derived from First Busey's annual
consolidated financial statements audited by McGladrey & Pullen, LLP,
independent certified public accountants, whose report on the financial position
as of December 31, 2001 and December 31, 2000, and the results of operations for
each of the three years in the period ended December 31, 2001, appears elsewhere
in this report. This financial data should be read in conjunction with the
financial statements and the related notes thereto appearing in this report.
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(dollars in thousands, except per share data)
BALANCE SHEET ITEMS
- -------------------
Securities $ 210,869 $ 228,597 $ 225,046 $217,991 $215,514
Loans 978,106 984,369 886,684 662,281 602,937
Allowance for loan losses 13,688 12,268 10,403 7,101 6,860
Total assets 1,300,689 1,355,044 1,247,123 951,531 915,540
Total deposits 1,105,999 1,148,787 1,027,981 826,704 811,453
Long-term debt 47,021 55,259 55,849 25,000 10,000
Company obligated mandatorily
redeemable preferred securities 25,000 - - - -
Stockholders' equity 105,790 92,325 82,284 87,103 81,279
RESULTS OF OPERATIONS
- ---------------------
Interest income $ 89,985 $ 93,242 $ 72,311 $ 67,048 $ 63,831
Interest expense 46,435 50,476 34,920 32,975 31,119
Net interest income 43,550 42,766 37,391 34,073 32,712
Provision for loan losses 2,020 2,515 2,570 700 1,075
Net income 15,653 14,053 12,548 11,398 10,371
PER SHARE DATA(1)
- ---------------------
Diluted earnings $ 1.15 $ 1.03 $ .90 $ .81 $ .74
Cash dividends (Class A) .52 .48 .44 .39 .35
Book value 7.73 6.86 6.08 6.36 5.92
Closing price 21.48 19.9375 22.625 18.25 13.75
OTHER INFORMATION
- ---------------------
Return on average assets 1.19% 1.12% 1.22% 1.22% 1.18%
Return on average equity 15.80% 16.56% 14.68% 14.02% 13.42%
Net interest margin(2) 3.64% 3.74% 4.02% 4.10% 4.20%
Stockholders' equity to assets 8.13% 6.81% 6.60% 9.15% 8.88%
(1) Per share amounts have been restated to give retroactive effect to the
two-for-one stock split which occurred August 3, 1998.
(2) Calculated as a percent of average earning assets.
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of the financial
condition and results of operations of First Busey Corporation and Subsidiaries
(the "Corporation") for the years ended December 31, 2001, 2000, and 1999. It
should be read in conjunction with "Business," "Selected Financial Data," the
consolidated financial statements and the related notes to the consolidated
financial statements and other data included in this Annual Report.
GENERAL
The Corporation's consolidated income is generated primarily by the
financial services activities of its subsidiaries. Since January 1, 1982, the
Corporation has acquired eleven banks and sold two; acquired six savings and
loan branches and two bank branches; acquired a bank branch in an FDIC assisted
acquisition of a failed bank; acquired a thrift holding company and federal
savings and loan; formed a trust company subsidiary; formed an insurance agency
subsidiary; formed a non-bank ATM subsidiary and acquired a travel agency. The
following table illustrates the amounts of net income contributed by each
subsidiary (on a pre-consolidation basis) since January 1, 1999, less purchase
accounting adjustments (net income for Busey Bank in following table excludes
income from Bank subsidiaries and includes deduction for amortization expense
recorded on parent company statements).
Subsidiary Acquired 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
Busey Bank(1) 3/20/80 $13,574 79.2% $13,094 82.6% $11,256 83.5%
Busey Bank Florida(2) 10/29/99 1,984 11.6% 937 5.9% 392 2.9%
First Busey Trust & Investment Co.(3) - 1,391 8.1% 1,459 9.2% 1,304 9.6%
First Busey Securities, Inc.(4) - (40) -0.2% 357 2.3% 352 2.6%
First Busey Resources, Inc.(5) - 130 0.8% 154 1.0% 159 1.2%
Busey Insurance Services, Inc.(6) - 10 0.0% (38) -0.2% 6 0.0%
BAT, Inc.(7) - 81 0.5% 20 0.1% 14 0.1%
Busey Travel, Inc.(8) 1/1/98 (6) 0.0% (153) -1.0% 9 0.1%
FFS Investments(9) 10/29/99 - 0.0% 19 0.1% (7) 0.0%
--------------------------------------------------------------------------
Total $17,124 100.0% $15,849 100.0% $13,485 100.0%
==========================================================================
(1) City Bank of Champaign and Champaign County Bank & Trust were merged into
Busey Bank as of January 1, 1987. First National Bank of Thomasboro was
merged into Busey Bank as of January 1,1988. State Bank of St. Joseph was
merged into Busey Bank as of November 3, 1989. The Bank of Urbana, Citizens
Bank of Tolono, and the assets of Community Bank of Mahomet subject to its
liabilities were merged into Busey Bank as of November 16, 1991. Busey Bank
of McLean County was merged into Busey Bank as of January 1, 1996. Busey
Business Bank was formed on January 12, 1998, and merged into Busey Bank
as of October 30, 1998.
(2) Acquired as a subsidiary of Eagle BancGroup, Inc. as of October 29, 1999.
(3) Formed as a subsidiary of the Corporation as of January 1, 1987 as a
successor to the combined trust departments of Busey Bank and Champaign
County Bank & Trust; transferred to Busey Investment Group on
January 1, 2001.
(4) Formed as a subsidiary of Busey Bank as of April 1, 1991; transferred to
Busey Investment Group on January 1, 2001.
(5) Reactivated as a subsidiary of First Busey Corporation as of
January 1, 1997. Real estate and certain other assets previously carried
on the parent company's balance sheet were transferred to subsidiary as of
that date.
(6) Formed as a subsidiary of Busey Bank as of October 1, 1997; transferred to
Busey Investment Group on January 1, 2001.
(7) Reactivated as a subsidiary of Busey Bank as of July 1, 1997.
(8) Acquired as a subsidiary of Busey Bank as of January 1, 1998.
(9) Acquired as a subsidiary of First Federal Savings and Loan Association of
Bloomington as of October 29, 1999; liquidated December 7, 2000.
11
Busey Bank, Busey Bank Florida and First Busey Trust & Investment Co. are
the three subsidiaries which have each contributed 10% of the Corporation's
consolidated net income.
RESULTS OF OPERATIONS-THREE YEARS ENDED DECEMBER 31, 2001
SUMMARY
The Corporation reported net income of $15,653,000 in 2001, up 11.4% from
$14,053,000 in 2000, which had increased 12.0% from $12,548,000 in 1999.
Diluted earnings per share in 2001 increased 11.7% to $1.15 from $1.03 in 2000,
which was a 14.4% increase from $.90 in 1999. The main factors contributing to
the increase in net income in 2001 were increases in net interest income,
service charges on deposit accounts, and gains on the sale of pooled mortgage
loans. Operating earnings, which exclude security gains and the related tax
expense, were $14,878,000 or $1.09 per share for 2001; $13,608,000, or $1.00 per
share for 2000; and $11,924,000, or $.86 per share for 1999.
Security gains after the related tax expense were $775,000 or 5.0% of net
income in 2001; $445,000 or 3.2% of net income in 2000; and $624,000 or 5.0% of
net income in 1999. First Busey Corporation owns a position in a qualified
equity security with substantial appreciated value. First Busey's Board
authorized an orderly liquidation of this asset over a ten-year period.
The Corporation's return on average assets was 1.19%, 1.12% and 1.22% for
2001, 2000, and 1999, respectively, and return on average equity was 15.80%,
16.56%, and 14.68% for 2001, 2000, and 1999, respectively. On an operating
earnings basis, return on average assets was 1.13%, 1.08%, and 1.16% for 2001,
2000, and 1999, respectively, and return on average equity was 15.02%, 16.03%
and 13.95% for 2001, 2000, and 1999, respectively.
NET INTEREST INCOME
Net interest income on a tax equivalent basis increased 1.8% in 2001 to
$44,883,000 in 2000, which reflected a 14.0% increase from $38,668,000 in 1999.
The decrease in interest rates initiated by the Federal Reserve Bank throughout
2001 led to declines in the amount of income earned on interest-earning assets
as well as the amount of expense recognized on interest-bearing liabilities.
The falling rate environment had greater impact on the yields earned on
interest-earning assets, particularly in the average balance of loans
outstanding, more than offset the decline due to the falling rate environment
and led to the increase in net interest income.
Average interest-earning assets increased to $1,232,889,000 in 2001 from
$1,179,245,000 and $963,641,000 in 2000 and 1999. The net interest margin,
expressed as a percentage of interest-earning assets, was 3.64% in 2001, 3.74%
in 2000, and 4.02% in 1999. The yield on interest-earning assets dropped from
8.03% in 2000 to 7.41% in 2001. Similarly, the rate paid on interest-bearing
liabilities fell from 4.77% in 2000 to 4.28% in 2001. Interest rates increase
during 2000 and led to increased in both the yield earned on interest-earning
assets and rates paid on interest-bearing liabilities as compared to 1999.
PROVISION FOR LOAN LOSSES
The provision for loan losses, which is a current charge against income,
represents an amount which management believes is sufficient to maintain an
adequate allowance for known and probable losses. In assessing the adequacy of
the allowance for loan losses, management considers the size and quality of the
loan portfolio measured against prevailing economic conditions, regulatory
guidelines, and historical loan loss experience, credit quality of the
portfolio, prevailing economic conditions, and regulatory guidelines. When a
determination is made by management to charge off a loan balance, such write-off
is charged against the allowance for loan losses.
The provision for loan losses decreased $495,000 to $2,020,000 in 2001 from
$2,515,000 in 2000 which had decreased from $2,570,000 in 1999. The decrease in
2001 is due primarily to management's assessment of improved credit quality
within the loan portfolio. Net charge-offs decreased to $600,000 in 2001 from
$650,000 in 2000, and total non-performing loans decreased to $2,224,000 as of
December 31, 2001, compared to $5,434,000 as of December 31, 2000. Net
charge-offs were $369,000 in 1999, and non-performing loans totaled $2,117,000
as of December 31, 1999.
12
Sensitive assets include nonaccrual loans, loans on First Busey
Corporation's watch loan report, and other loans identified as having more than
reasonable potential for loss. The watch loan list is comprised of loans which
have been restructured or involve customers in industries which have been
adversely affected by market conditions. The majority of these loans are being
repaid in conformance with their contracts.
OTHER INCOME
Other income increased 17.3% in 2001 to $21,460,000 from $18,288,000 in
2000, which reflected a 12.9% increase from $16,192,000 in 1999. The increases
in 2001 and 2000 are due primarily to increases in service charges on deposit
accounts, trust fee income, commissions and brokers' fees, and gains on the sale
of loans. As a percentage of total income, other income was 19.3%, 16.4%, and
18.3% in 2001, 2000, and 1999, respectively. Gains on the sale of securities,
as a component of other income, totaled $1,285,000 (6.0%) in 2001, $737,000
(4.0%) in 2000, and $1,035,000 (6.4%) in 1999. Other income also includes gains
on sales of loans, as a component of other income, of $2,296,000 (10.7%),
$1,112,000 (6.1%), and $895,000 (5.5%) in 2001, 2000, and 1999, respectively.
Additional components of other income were fee income and trust fees.
Service charges and other fee income increased 6.8% to $9,950,000 in 2001 from
$9,317,000 in 2000, which was a 23.0% increase from $7,572,000 in 1999. The
growth in fee income in 2001 and 2000 is due primarily to increases in service
charges on deposit accounts. Despite the poor equity market in 2001, trust fees
increased 5.6% in 2001. Trust revenues were $4,607,000 in 2001, $4,364,000 in
2000, and $4,013,000 in 1999. Increases in trust department revenues in each
year were primarily due to increases in assets under care to $1,178,483,000 at
December 31, 2001, from $1,066,723,000 at December 31, 2000, which is an
increase from $971,554,000 from December 31, 1999. Remaining other income
increased 20.5% to $3,322,000 in 2001 from $2,758,000 in 2000 which was a 3.0%
increase from $2,677,000 in 1999.
OTHER EXPENSES
Other expenses increased 4.6% in 2001 to $38,974,000 from $37,249,000 in
2000, which reflected an increase from $33,063,000 in 1999. As a percentage of
total income, other expenses were 35.0%, 33.4%, and 37.4% in 2001, 2000, and
1999, respectively. Employee related expenses, including salaries and wages and
employee benefits, increased 10.4% in 2001 to $21,066,000, as compared to
$19,080,000 in 2000, which was a 8.6% increase from $17,565,000 in 1999. As a
percent of average assets, employee related expenses were 1.61%, 1.51%, and
1.70% in 2001, 2000, and 1999, respectively. The Corporation had 498, 484, and
494 full-time equivalent employees at December 31, 2001, 2000, and 1999,
respectively. Net occupancy expense of bank premises and furniture and
equipment expenses increased 3.4% in 2001 to $6,957,000 as compared to
$6,729,000 in 2000 and $6,010,000 in 1999.
Remaining other expenses decreased $489,000 or 4.3% to $10,951,000 in 2001
from $11,440,000 in 2000, which was a 20.6% increase from $9,488,000 in 1999.
Data processing expenses fell to $799,000 for the year ended December 31, 2001,
compared to $1,142,000 for the year ended December 31, 2000, and $838,000 for
the year ended December 31, 1999. Data processing expenses were higher in 2000
due to one-time conversion and setup expenses. Amortization and impairment
expenses also declined in 2001 as compared to 2000. During the year ended
December 31, 2001, the Corporation recognized an impairment write-down of
$325,000 on a customer list purchased by First Busey Securities, Inc. Revenues
generated from this customer list were lower than originally projected. During
the year ended December 31, 2000, the Corporation recognized an impairment
write-down of $600,000 on the core deposit intangible associated with the
acquisition of First Federal.
INCOME TAXES
Income tax expense in 2001 was $8,363,000 as compared to $7,237,000 in 2000
and $5,402,000 in 1999. The provision for income taxes as a percent of income
before income taxes was 34.8%, 34.0%, and 30.1%, for 2001, 2000, and 1999,
respectively.
13
BALANCE SHEET-DECEMBER 31, 2001 AND DECEMBER 31, 2000
Total assets on December 31, 2001 were $1,300,689,000, a decrease of 4.0%
from $1,355,044,000 on December 31, 2000. Total loans, net of unearned interest,
decreased 0.6% to $978,106,000 on December 31, 2001, as compared to $984,369,000
on December 31, 2000. Total deposits decreased 3.7% to $1,105,999,000 on
December 31, 2001 as compared to $1,148,787,000 on December 31, 2000.
Non-interest bearing deposits increased $4,016,000 or 3.0% during 2001.
Interest-bearing deposits decreased $46,804,000 or 4.6% during 2001.
Total stockholders' equity increased 14.6% to $105,790,000 on December 31,
2001, as compared to $92,325,000 on December 31, 2000. Growth in equity is due
primarily to $8,646,000 earnings retained in the Corporation combined with net
increases of $2,211,000 in unrealized gains on available for sale securities and
a $3,219,000 decrease in Treasury stock. Treasury shares will be reissued in
future years as participants exercise outstanding options under the
Corporation's stock option plan which is discussed in Note 15 to the
Corporation's consolidated financial statements.
A. EARNING ASSETS
The average interest-earning assets of the Corporation were 94.0%, 93.2%,
and 93.4%, of average total assets for the years ended December 31, 2001, 2000,
and 1999, respectively.
B. INVESTMENT SECURITIES
The Corporation has classified all investment securities as securities
available for sale. These securities are held with the option of their disposal
in the foreseeable future to meet investment objectives or for other operational
needs. Securities available for sale are carried at fair value. As of December
31, 2001, the fair value of these securities was $210,869,000 and the amortized
cost was $197,398,000. There were $13,653,000 of gross unrealized gains and
$182,000 of gross unrealized losses for a net unrealized gain of $13,471,000.
The after-tax effect ($8,128,000) of this unrealized gain has been included in
stockholders' equity. The increase in market value for the debt securities in
this classification was a result of declining interest rates. The fair value
increase in the equity securities was primarily due to a $587,000 increase in
the value of 100,000 shares of USA Ed Inc. (SLM) common stock owned by the
Corporation.
The composition of securities available for sale is as follows:
Years ended December 31,
-----------------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------------
(dollars in thousands)
U.S. Treasuries and Agencies $143,490 $162,886 $164,565 $159,261 $161,762
Equity securities 18,058 15,479 13,079 12,550 11,994
States and political subdivisions 43,767 43,197 41,554 37,398 32,351
Other 5,554 7,035 5,848 8,782 9,407
-----------------------------------------------------
Fair value of securities available for sale $210,869 $228,597 $225,046 $217,991 $215,514
=====================================================
Amortized cost $197,398 $218,790 $221,601 $207,531 $206,589
=====================================================
Fair value as a percentage of amortized cost 106.82% 104.48% 101.55% 105.04% 104.32%
=====================================================
14
The maturities, fair values and weighted average yields of securities
available for sale as of December 31, 2001 are:
Due in 1 year or Due after 1 year Due after 5 years Due after
less through 5 years through 10 years 10 years
------------------------------------------------------------------------------
Fair Weighted Fair Weighted Fair Weighted Fair Weighted
Value Average Value Average Value Average Value Average
Investment Securities(1) Yield Yield Yield Yield
------------------------------------------------------------------------------
(dollars in thousands)
U.S. Treasuries and Agencies $51,851 5.63% $ 91,426 4.59% $ 213 6.04% $ - 0.00%
States and political subdivisions(2) 4,108 8.49% 13,797 7.49% 23,787 6.97% 2,075 7.51%
Other 1,236 6.49% 2,830 4.91% 360 6.62% 1,128 10.02%
------------------------------------------------------------------------------
Total $57,195 5.85% $108,053 4.97% $24,360 6.96% $3,203 8.39%
==============================================================================
(1) Excludes equity securities and mortgage backed securities.
(2) On a tax-equivalent basis, assuming a federal income tax rate of 35% (the
effective federal income tax rate as of December 31, 2000)
The securities held to maturity portfolio consisted of debt securities
which provided the Corporation with a relatively stable source of income.
Additionally, the investment portfolio provides a balance to interest rate and
credit risk in other categories of the balance sheet while providing a vehicle
for the investment of available funds and supplying securities to pledge as
required collateral for certain deposits. All remaining securities were
transferred to the available for sale portfolio as of December 31, 1997.
The Corporation also uses its investment portfolio to manage its tax
position. Depending upon projected levels of taxable income for the
Corporation, periodic changes are made in the mix of tax-exempt and taxable
securities to achieve maximum yields on a tax-equivalent basis. U.S. government
and agency securities as a percentage of total securities decreased to 68.0% at
December 31, 2001 from 71.3% at December 31, 2000 while obligations of state and
political subdivisions (tax-exempt obligations) as a percentage of total
securities increased to 20.8% at December 31, 2001, from 18.9% at December 31,
2000.
LOAN PORTFOLIO
Loans, including loans held for sale, before allowance for loan losses,
decreased 0.6% to $978,106,000 in 2001 from $984,369,000 in 2000. Non-farm
non-residential real estate mortgage loans increased $22,702,000, or 9.8%, to
$253,932,000 in 2001 from $231,230,000 in 2000. This increase reflects
management's emphasis on commercial loans secured by mortgages. Also, 1 to 4
family residential real estate mortgage loans (not held for sale) decreased
$49,464,000, or 12.4%, to $349,270,000 in 2001 from $398,734,000 in 2000. In
2001's low interest rate environment, the Corporation experienced significant
refinance activity. The Corporation has no loans to customers engaged in oil
and gas exploration or to foreign companies or governments. Commitments under
standby letters of credit, unused lines of credit and other conditionally
approved credit lines, totaled approximately $239,287,000 as of December 31,
2001.
The loan portfolio includes a concentration of loans for commercial real
estate amounting to approximately $308,197,000 and $293,184,000 as of December
31, 2001 and 2000, respectively. Generally, these loans are collateralized by
assets of the borrowers. The loans are expected to be repaid from cash flows or
from proceeds from the sale of selected assets of the borrowers. Credit losses
arising from lending transactions for commercial real estate entities are
comparable with the Corporation's credit loss experience on its loan portfolio
as a whole.
15
The composition of loans is as follows:
Years ended December 31,
------------------------------------------------
2001 2000 1999 1998 1997
------------------------------------------------
(dollars in thousands)
Commercial and financial $121,694 $124,052 $119,800 $ 80,958 $ 63,861
Agricultural 21,022 20,844 20,126 19,072 17,403
Real estate-farmland 14,414 15,411 15,841 14,184 11,782
Real estate-construction 83,701 75,672 52,479 44,713 31,306
Real estate-mortgage 679,351 697,410 622,075 467,435 439,660
Installment loans to individuals 57,924 50,980 56,363 35,919 38,925
------------------------------------------------
Loans $978,106 $984,369 $886,684 $662,281 $602,937
================================================
The following table sets forth remaining maturities of selected loans
(excluding certain real estate-farmland, real estate-mortgage loans and
installment loans to individuals) at December 31, 2001.
1 Year or 1 to 5 Years Over 5 Years Total
Less
----------------------------------------------------
(dollars in thousands)
Commercial, financial and agricultural $ 94,512 $30,148 $18,056 $142,716
Real estate-construction 52,154 28,615 2,932 83,701
----------------------------------------------------
Total $146,666 $58,763 $20,988 $266,417
====================================================
Interest rate sensitivity of selected loans
Fixed rate $ 42,415 $16,122 $ 3,347 $ 61,884
Adjustable rate 104,251 42,641 17,641 164,533
----------------------------------------------------
Total $146,666 $58,763 $20,988 $226,417
====================================================
ALLOWANCE FOR LOAN LOSSES
Management has established an allowance for loan losses which reduces the
total loans outstanding by an estimate of uncollectible loans. Loans deemed
uncollectible are charged against and reduce the allowance. Periodically, a
provision for loan losses is charged to current expense. This provision acts to
replenish the allowance for loan losses and to maintain the allowance at a level
that management deems adequate.
There is no precise method of predicting specific loan losses or amounts
which ultimately may be charged off on segments of the loan portfolio. The
determination that a loan may become uncollectible, in whole or in part, is a
matter of judgment. Similarly, the adequacy of the allowance for loan losses
can be determined only on a judgmental basis, after full review, including (a)
consideration of economic conditions and their effect on particular industries
and specific borrowers; (b) a review of borrowers' financial data, together with
industry data, the competitive situation, the borrowers' management capabilities
and other factors; (c) a continuing evaluation of the loan portfolio, including
monitoring by lending officers and staff credit personnel of all loans which are
identified as being of less than acceptable quality; (d) an in-depth appraisal,
on a monthly basis, of all loans judged to present a possibility of loss (if, as
a result of such monthly appraisals, the loan is judged to be not fully
collectible, the carrying value of the loan is reduced to that portion
considered collectible); and (e) an evaluation of the underlying collateral for
secured lending, including the use of independent appraisals of real estate
properties securing loans.
Periodic provisions for loan losses are determined by management based upon
the size and the quality of the loan portfolio measured against prevailing
economic conditions and historical loan loss experience and also based on
specific exposures in the portfolio. Management has instituted a formal loan
review system supported by an effective credit analysis and control process.
The Corporation will maintain the allowance for loan losses at a level
sufficient to absorb estimated uncollectible loans and, therefore, expects to
make periodic additions to the allowance for loan losses.
16
The following table shows activity affecting the allowance for loan losses:
Years ended December 31
-----------------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------------
(dollars in thousands)
Average loans outstanding during period $961,779 $937,239 $731,491 $621,475 $584,327
=====================================================
Allowance for loan losses:
Balance at beginning of period $ 12,268 $ 10,403 $ 7,101 $ 6,860 $ 6,131
-----------------------------------------------------
Loans charged-off:
Commercial, financial and agricultural $ 103 $ 70 $ 40 $ 62 $ 192
Real estate-construction - - - - -
Real estate-mortgage 408 290 145 282 50
Installment loans to individuals 265 414 366 260 317
-----------------------------------------------------
Total charge-offs $ 776 $ 774 $ 551 $ 604 $ 559
-----------------------------------------------------
Recoveries:
Commercial, financial and agricultural $ 15 $ 22 $ 16 $ 12 $ 13
Real estate-construction - - - - -
Real estate-mortgage 42 4 67 49 110
Installment loans to individuals 119 98 99 84 90
-----------------------------------------------------
Total recoveries $ 176 $ 124 $ 182 $ 145 $ 213
-----------------------------------------------------
Net loans charged-off $ 600 $ 650 $ 369 $ 459 $ 346
-----------------------------------------------------
Provision for loan losses $ 2,020 $ 2,515 $ 2,570 $ 700 $ 1,075
-----------------------------------------------------
Net additions due to acquisition - - $ 1,101 - -
-----------------------------------------------------
Balance at end of period $ 13,688 $ 12,268 $ 10,403 $ 7,101 $ 6,860
=====================================================
Ratios:
Net charge-offs to average loans 0.06% 0.07% 0.05% 0.07% 0.06%
=====================================================
Allowance for loan losses to total loans
at period end 1.40% 1.25% 1.17% 1.07% 1.14%
=====================================================
The following table sets forth the allowance for loan losses by loan categories
as of December 31 for each of the years indicated:
-----------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------------------------------------------------
% of % of % of % of % of
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
-----------------------------------------------------------------------------------------
(dollars in thousands)
Commercial, financial, agri-
cultural and real estate-farmland $ 1,880 16.1% $ 1,854 16.3% $ 3,391 17.6% $1,757 17.2% $1,059 15.4%
Real estate-construction - 8.6% - 7.7% - 5.9% - 6.8% - 5.2%
Real estate-mortgage 10,880 69.4% 9,051 70.8% 5,708 70.1% 4,380 70.6% 4,456 72.9%
Installment loans to individuals 811 5.9% 708 5.2% 1,293 6.4% 964 5.4% 1,045 6.5%
Unallocated 117 N/A 655 N/A 11 N/A - N/A 300 N/A
-----------------------------------------------------------------------------------------
Total $13,688 100% $12,268 100% $10,403 100% $7,101 100% $6,860 100%
=========================================================================================
This table indicates growth in the allowance for loan losses for real
estate mortgages as of December 31, 2001 as compared to December 31, 2000. The
increase in the allowance allocated to real estate mortgages is due primarily to
two factors. The first factor contributing to this increase is the growth in
non-accrual loans on which higher risk factors have been applied. The second
factor contributing to this increase is the growth in the total of higher risk
non-farm nonresidental mortgages relative to the balance of total real estate
mortgage balances.
NON-PERFORMING LOANS
It is management's policy to place commercial and mortgage loans on
non-accrual status when interest or principal is 90 days or more past due. Such
loans may continue on accrual status only if they are both well-secured and in
the process of collection.
17
The following table sets forth information concerning non-performing loans at
December 31 for each of the years indicated:
Years ended December 31,
---------------------------------------------------
2001 2000 1999 1998 1997
---------------------------------------------------
(dollars in thousands)
Non-accrual loans $1,265 $ 767 $1,220 $ 526 $ 628
Loans 90 days past due and still accruing 959 4,667 897 1,052 1,033
Restructured loans - - - - -
---------------------------------------------------
Total non-performing loans $2,224 $5,434 $2,117 $1,578 $1,661
---------------------------------------------------
Repossessed assets $ 30 $ 230 $ 459 $ 320 $ 516
Other assets acquired in satisfaction of debts
previously contracted 1 11 5 14 5
---------------------------------------------------
Total non-performing other assets $ 31 $ 241 $ 464 $ 334 $ 521
---------------------------------------------------
Total non-performing loans and non-
performing other assets $2,255 $5,675 $2,581 $1,912 $2,182
===================================================
Non-performing loans to loans, before
allowance for loan losses 0.23% 0.55% 0.24% 0.24% 0.28%
===================================================
Non-performing loans and non-performing
other assets to loans, before allowance for
loan losses 0.23% 0.58% 0.29% 0.29% 0.36%
===================================================
On January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement No. 118, which requires loans to be considered
impaired when, based on current information and events, it is probable the
Corporation will not be able to collect all amounts due. The accrual of
interest income on impaired loans is discontinued when there is reasonable doubt
as to the borrower's ability to meet contractual payments of interest or
principal. Interest income on these loans is recognized to the extent interest
payments are received and the principal is considered fully collectible. For
the years ended December 31, 2001, 2000, and 1999, no interest was recognized
from impaired loans.
The gross interest income that would have been recorded in the years ended
December 31, 2001, 2000 and 1999 if the non-accrual and restructured loans had
been current in accordance with their original terms was $84,000, $41,000, and
$31,000, respectively. The amount of interest collected on those loans that was
included in interest income was $17,000 for the year ended December 31, 2001,
$2,000 for the year ended December 31, 2000, and $0 for the year ended December
31, 1999.
POTENTIAL PROBLEM LOANS
Potential problem loans are those loans which are not categorized as
impaired, non-accrual, past due or restructured, but where current information
indicates that the borrower may not be able to comply with present loan
repayment terms. Management assesses the potential for loss on such loans as it
would with other problem loans and has considered the effect of any potential
loss in determining its provision for possible loan losses. Potential problem
loans totaled $889,000 at December 31, 2001. There are no other loans identified
which management believes represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity or capital resources. There are no other credits identified about
which management is aware of any information which causes management to have
serious doubts as to the ability of such borrower(s) to comply with the loan
repayment terms.
OTHER INTEREST-BEARING ASSETS
There are no other interest-bearing assets which are categorized as
impaired.
18
DEPOSITS
As indicated in the following table, average interest-bearing deposits as a
percentage of average total deposits decreased to 89.3% for the year ended
December 31, 2001, from 89.6% for the year ended December 31, 2000.
December 31,
--------------------------------------------------------------------------------------------
2001 2000 1999
--------------------------------------------------------------------------------------------
(dollars in thousands)
Average % Total Average Average % Total Average Average % Total Average
Balance Rate Balance Rate Balance Rate
--------------------------------------------------------------------------------------------
Non-interest bearing
demand deposits $ 119,274 10.7% -% $ 107,882 10.4% - % $ 91,484 10.5% -%
Interest bearing demand
deposits 34,199 3.1% 2.15% 28,976 2.8% 2.86% 13,951 1.6% 2.01%
Savings/Money Market 449,874 40.5% 2.59% 411,262 39.6% 3.37% 390,781 44.9% 2.98%
Time deposits 508,400 45.7% 5.55% 489,779 47.2% 5.63% 373,563 43.0% 5.13%
--------------------------------------------------------------------------------------------
Total $1,111,747 100.0% 3.65% $1,037,899 100.0% 4.07% $869,779 100.0% 3.57%
============================================================================================
Certificates of deposit of $100,000 and over and other time deposits of
$100,000 and over at December 31, 2001, had the following maturities (dollars in
thousands):
Under 3 months $39,418
3 to 6 months 18,396
6 to 12 months 16,990
Over 12 months 16,513
-------
Total $91,317
=======
19
SHORT-TERM BORROWINGS
The following table sets forth the distribution of short-term borrowings
and weighted average interest rates thereon at the end of each of the last three
years. Federal funds purchased and securities sold under agreements to
repurchase generally represent overnight borrowing transactions. Other
short-term borrowings consist of various demand notes and notes with maturities
of less than one year.
Federal funds purchased and
securities sold under agreements Other short-term
to repurchase borrowings
--------------------------------------------------------
(dollars in thousands)
2001
Balance, December 31, 2001 $ 9,767 $ 2,000
Weighted average interest rate at end of period 5.68% 6.73%
Maximum outstanding at any month end $18,126 $30,000
Average daily balance $15,692 $14,985
Weighted average interest rate during period(1) 6.25% 7.39%
2000
Balance, December 31, 2000 $18,890 $30,000
Weighted average interest rate at end of period 5.68% 8.29%
Maximum outstanding at any month end $24,064 $82,120
Average daily balance $29,504 $44,961
Weighted average interest rate during period(1) 5.94% 7.76%
1999
Balance, December 31, 1999 $23,580 $48,327
Weighted average interest rate at end of period 5.68% 7.04%
Maximum outstanding at any month end $42,931 $49,727
Average daily balance $16,068 $15,510
Weighted average interest rate during period(1) 5.53% 5.96%
(1) The weighted average interest rate is computed by dividing total interest
for the year by the average daily balance outstanding.
LIQUIDITY
Liquidity is the availability of funds to meet all present and future cash
flow obligations arising in the daily operations of the business at a minimal
cost. These financial obligations consist of needs for funds to meet extensions
of credit, deposit withdrawals and debt servicing.
The sources of short-term liquidity utilized by the Corporation consist of
asset maturities, sales, deposits and capital funds. Additional liquidity is
provided by bank lines of credit, repurchase agreements and the ability to
borrow from the Federal Reserve Bank and Federal Home Loan Bank. The Corporation
does not deal in or use brokered deposits as a source of liquidity. Long-term
liquidity needs will be satisfied primarily through retention of capital funds.
An additional source of liquidity that can be managed for short-term and
long-term needs is the Corporation's ability to securitize or package loans
(primarily mortgage loans) for sale.
The objective of liquidity management by the Corporation is to ensure that
funds will be available to meet demand in a timely and efficient manner. Based
upon the level of investment securities that reprice within 30 days and 90 days,
management currently believes that adequate liquidity exists to meet all
projected cash flow obligations.
20
The Corporation achieves a satisfactory degree of liquidity through
actively managing both assets and liabilities. Asset management guides the
proportion of liquid assets to total assets, while liability management monitors
future funding requirements and prices liabilities accordingly. Average liquid
assets are shown in the table below:
LIQUID ASSETS
Years Ended December 31,
----------------------------
Average Balances 2001 2000 1999
----------------------------
(dollars in thousands)
Federal funds sold $30,142 $10,310 $10,723
============================
Percentage of average total assets 2.30% 0.82% 1.04%
============================
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
In June, 2001, First Busey Capital Trust I, a wholly owned subsidiary of
the Corporation, issued $25,000,000 in cumulative trust preferred securities.
The obligations of the trust are fully and unconditionally guaranteed, on a
subordinated basis, by the Corporation. The trust preferred securities are
mandatorily redeemable upon maturity and are callable beginning June 18, 2006.
Proceeds from these trust preferred securities were used to reduce the
Corporation's short-term debt associated with the acquisition of Eagle BancGroup
and First Federal Savings & Loan Association.
RATE SENSITIVE ASSETS AND LIABILITIES
Interest rate sensitivity is a measure of the volatility of the net
interest margin as a consequence of changes in market rates. The
rate-sensitivity chart shows the interval of time in which given volumes of
rate-sensitive earning assets and rate-sensitive interest bearing liabilities
would be responsive to changes in market interest rates based on their
contractual maturities or terms for repricing. It is however, only a static,
single-day depiction of the Corporation's rate sensitivity structure, which can
be adjusted in response to changes in forecasted interest rates.
The following table sets forth the static rate-sensitivity analysis of the
Corporation as of December 31, 2001:
Rate Sensitive Within
------------------------------------------------------------------------------
1-30 Days 31-90 Days 91-180 Days 181 Days- Over 1 Yr Total
1 Yr
------------------------------------------------------------------------------
(dollars in thousands)
Interest-bearing deposits $ 269 $ - $ - $ - $ - $ 269
Federal funds sold 20,000 - - - - 20,000
Investment securities
U.S. Treasuries and Agencies 11,024 10,019 18,222 23,613 80,612 143,490
States and political subdivisions 1,237 775 61 2,033 39,661 43,767
Other securities 9,656 - 303 1,032 12,621 23,612
Loans (net of unearned interest) 348,487 82,131 77,907 127,372 342,209 978,106
------------------------------------------------------------------------------
Total rate-sensitive assets $ 390,673 $ 92,925 $ 96,493 $ 154,050 $ 475,103 $1,209,244
------------------------------------------------------------------------------
Interest bearing transaction deposits $ 48,241 $ - $ - $ - $ - $ 48,241
Savings deposits 94,868 - - - - 94,868
Money market deposits 374,186 - - - - 374,186
Time deposits 72,680 72,200 80,736 111,792 112,611 450,019
Short-term borrowings 3,150 1,900 2,600 2,650 1,467 11,767
Long-term debt 10,021 20,000 - - 17,000 47,021
Company obligated mandatorily
redeemable preferred securities - - - - 25,000 25,000
------------------------------------------------------------------------------
Total rate-sensitive liabilities $ 603,146 $ 94,100 $ 83,336 $ 114,442 $ 156,078 $1,051,102
------------------------------------------------------------------------------
Rate-sensitive assets less rate-
sensitive liabilities $ (212,473) $ (1,175) $ 13,157 $ 39,608 $ 319,025 $ 158,142
------------------------------------------------------------------------------
Cumulative Gap $ (212,473) $ (213,648) $ (200,491) $ (160,883) $ 158,142
==================================================================
Cumulative amounts as a percentage
of total rate-sensitive assets -17.57% -17.67% 16.58% -13.30% 13.08%
==================================================================
Cumulative Ratio 0.65 0.69 0.74 0.82 1.15
==================================================================
21
The foregoing table shows a negative (liability sensitive) cumulative
unadjusted gap of approximately $212 million in the 1-30 day repricing category.
The gap report indicates that the cumulative gap is negative through one year.
Beyond 90 days, the gap becomes asset sensitive as there are more rate sensitive
assets than rate-sensitive liabilities repricing after 90 days. The composition
of the gap structure at December 31, 2001 will benefit the Corporation more if
interest rates increase during the next year by allowing the net interest margin
to grow as asset rates would reprice more quickly than rates on rate-sensitive
assets.
CAPITAL RESOURCES
Other than from the issuance of common stock, the Corporation's primary
source of capital is net income retained by the Corporation. During the year
ended December 31, 2001, the Corporation earned $15,653,000 and paid dividends
of $7,007,000 to stockholders, resulting in a retention of current earnings of
$8,646,000.
The Federal Reserve Board uses capital adequacy guidelines in its
examination and regulation of bank holding companies and their subsidiary banks.
Risk-based capital ratios are established by allocating assets and certain
off-balance sheet commitments into four risk-weighted categories. These
balances are then multiplied by the factor appropriate for that risk-weighted
category. The guidelines require bank holding companies and their subsidiary
banks to maintain a total capital to total risk-weighted asset ratio of not less
than 8.00%, of which at least one half must be Tier 1 capital, and a Tier 1
leverage ratio of not less than 4.00%. As of December 31, 2001, the Corporation
had a total capital to total risk-weighted asset ratio of 13.63%, a Tier 1
capital to risk-weighted asset ratio of 11.93% and a Tier 1 leverage ratio of
8.78%; the Corporation's bank subsidiary, Busey Bank, had ratios of 11.14%,
9.47%, and 7.62%, respectively; the Corporation's thrift subsidiary, Busey Bank
Florida, had ratios of 41.50%, 40.25%, and 7.34%, respectively. As these ratios
indicate, the Corporation and its bank subsidiaries exceed the regulatory
capital guidelines.
REGULATORY CONSIDERATIONS
It is management's belief that there are no current recommendations by the
regulatory authorities which if implemented, would have a material effect on the
Corporation's liquidity, capital resources, or operations.
NEW ACCOUNTING PRONOUNCEMENTS
Accounting for Business Combinations In June, 2001, Statement on Financial
------------------------------------
Accounting Standards No. 141, "Business Combinations," was issued to address
financial accounting and reporting for business combinations and supersedes APB
Opinion No. 16 and Statement on Financial Accounting Standards No. 38.
Statement No. 141 requires all business combinations in the scope of this
statement to be accounted for using the purchase method. Statement No. 141 is
effective for business combinations initiated after June 30, 2001 and all
business combinations accounted for using the purchase method for which the
acquisition date is July 1, 2001 or later.
Accounting for Goodwill and Other Assets Statement of Financial Accounting
----------------------------------------
Standard No. 142, "Goodwill and Other Intangible Assets," was issued in June,
2001, by the Financial Accounting Standards Board. The standard addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, "Intangible Assets." It addresses how
intangible assets should be accounted for at acquisition and in subsequent
periods. Most significantly, goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at least
annually for impairment. Intangible assets that have finite useful lives will
continue to be amortized over their useful lives. The Standard also provides
specific guidance for testing goodwill for impairment and requires additional
disclosures about goodwill and intangible assets.
The Standard is effective for fiscal years beginning after December 15,
2001. The Standard is required to be applied to the beginning of an entity's
fiscal year and to be applied to all goodwill and other intangible assets
recognized in its financial statements at that date. Impairment losses for
goodwill and indefinite-lived intangible assets that arise due to the initial
application of this Standard are to be reported as resulting from a change in
accounting principle. The Corporation will apply Statement No. 142 beginning in
the first quarter of 2002. Application of the nonamortization provisions of
22
Statement No. 142 is expected to result in an increase in net income of $933,000
($.07 per share) per year. During 2002 the Corporation will perform the first
of the required impairment tests of goodwill and indefinite lived intangible
assets, but has not yet determined what effect those tests will have on the
earnings and financial position of the Corporation.
Accounting for Asset Retirement Obligations In June, 2001, Statement on
-------------------------------------------
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations," was issued to address financial reporting and obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This Statement applies to all entities and to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development or normal operations of a long-lived
asset, except for certain obligations of lessees. Statement No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Corporation does not believe the adoption of the Standard will
have a material impact on the consolidated financial statements.
Accounting for the Impairment or Disposal of Long-Lived Assets In August
--------------------------------------------------------------
2001, Statement on Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," was issued to supersede Statement
No. 121, "Accounting for the Impairment and for Long-Lived Assets to Be Disposed
Of," and the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." Statement No. 144 is effective for financial
statements issued for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with early application encouraged.
The Corporation does not believe the adoption of the Standard will have a
material impact on the consolidated financial statements.
EFFECTS OF INFLATION
The effect of inflation on a financial institution differs significantly
from the effect on an industrial company. While a financial institution's
operating expenses, particularly salary and employee benefits, are affected by
general inflation, the asset and liability structure of a financial institution
consists largely of monetary items. Monetary items, such as cash, loans and
deposits, are those assets and liabilities which are or will be converted into a
fixed number of dollars regardless of changes in prices. As a result, changes
in interest rates have a more significant impact on a financial institution's
performance than does general inflation. For additional information regarding
interest rates and changes in net interest income see "Selected Statistical
Information."
C. SELECTED STATISTICAL INFORMATION
The following tables contain information concerning the consolidated
financial condition and operations of the Corporation for the periods, or as of
the dates, shown. All average information is provided on a daily average basis.
23
The following table shows the consolidated average balance sheets,
detailing the major categories of assets and liabilities, the interest income
earned on interest-earning assets, the interest expense paid for
interest-bearing liabilities, and the related interest rates:
Consolidated Average Balance Sheets and Interest Rates
Years Ended December 31,
----------------------------------------------------------------------------------------------
2001 2000 1999
----------------------------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
----------------------------------------------------------------------------------------------
(dollars in thousands)
Assets
Interest-bearing bank deposits $ 13,721 $ 513 3.74% $ 8,714 $ 228 $ 4,344 $ 105 2.42%
Federal funds sold 30,142 1,179 3.91% 10,310 627 6.08% 10,723 479 4.47%
Investment securities:
U.S. Treasuries and Agencies 159,969 8,726 5.45% 162,526 9,434 5.80% 153,576 8,637 5.62%
Obligations of states and
political subdivisions(1) 43,896 3,169 7.22% 40,833 3,129 7.66% 40,006 3,000 7.50%
Other securities 23,382 889 3.80% 19,623 995 5.07% 23,501 1,082 4.93%
Loans (net of unearned
discount)(1),(2) 961,779 76,842 7.99% 937,239 80,146 8.55% 731,491 60,285 8.24%
----------------------------------------------------------------------------------------------
Total interest-earning assets(1) $1,232,889 $ 91,318 7.41% $1,179,245 $ 94,559 8.02% $ 963,641 $ 73,588 7.64%
==============================================================================================
Cash and due from banks 31,690 28,772 26,945
Premises and equipment 30,283 30,399 25,437
Allowance for loan losses (12,774) (11,077) (7,777)
Other assets 30,173 32,777 23,532
----------- ----------- -----------
Total assets $1,312,261 $1,260,116 $1,031,778
=========== =========== ===========
Liabilities and Stockholders'
Equity
Interest bearing transaction
deposits $ 34,199 $ 734 2.15% $ 28,976 $ 830 2.86% $ 13,951 $ 280 2.01%
Savings deposits 90,544 2,059 2.27% 91,750 2,794 3.05% 85,720 2,554 2.98%
Money market deposits 359,330 9,614 2.68% 319,512 11,073 3.47% 305,061 9,105 2.98%
Time deposits 508,400 28,207 5.55% 489,779 27,589 5.63% 373,563 19,146 5.13%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 15,692 981 6.25% 29,504 1,752 5.94% 16,068 888 5.53%
Other 14,985 1,108 7.39% 44,961 3,491 7.76% 15,510 924 5.96%
Long-term debt 47,703 2,532 5.31% 53,240 2,947 5.54% 36,505 2,023 5.54%
Company obligated mandatorily
redeemable preferred securities 13,333 1,200 9.00% - - - -
----------------------------------------------------------------------------------------------
Total interest-bearing liabilities $1,084,186 $ 46,435 4.28% $1,057,722 $ 50,476 4.77% $ 846,378 $ 34,920 4.13%
==============================================================================================
Net interest spread 3.13% 3.25% 3.51%
======= ======= =======
Demand deposits 119,274 107,882 91,484
Other liabilities 9,746 9,628 8,425
Stockholders' equity 99,055 84,884 85,491
----------- ----------- -----------
Total liabilities and
stockholders' equity $1,312,261 $1,260,116 $1,031,778
=========== =========== ===========
Interest income/earning assets(1) $1,232,889 $ 91,318 7.41% $1,179,245 $ 94,559 8.02% $ 963,641 $ 73,588 7.64%
Interest expense/earning assets $1,232,889 $ 46,435 3.77% $1,179,245 $ 50,476 4.28% $ 963,641 $ 34,920 3.62%
----------------------------------------------------------------------------------------------
Net interest margin(1) $ 44,883 3.64% $ 44,083 3.74% $ 38,668 4.02%
======== ======= ======== ======= ======== =======
(1) On a tax equivalent basis, assuming a federal income tax rate of 35%
(2) Non-accrual loans have been included in average loans, net of unearned
discount
24
Changes In Net Interest Income
Years Ended December 31, 2001, 2000, and 1999
-------------------------------------------------------------------------
Year 2001 vs 2000 Change due to(1) Year 2000 vs 1999 Change due to(1)
-------------------------------------------------------------------------
Average Average Total Average Average Total
Volume Yield/Rate Change Volume Yield/Rate Change
-------------------------------------------------------------------------
(dollars in thousands)
Increase (decrease) in interest income:
Interest-bearing bank deposits $ 163 $ 122 $ 285 $ 114 $ 9 $ 123
Federal funds sold 678 (126) 552 ($18) 166 148
Investment securities:
U.S. Treasuries and Agencies (147) (561) (708) 514 283 797
States and political subdivisions(2) 175 (135) 40 63 66 129
Other securities 346 (452) (106) (226) 139 (87)
Loans(2) 2,190 (5,494) (3,304) 17,519 2,342 19,861
-------------------------------------------------------------------------
Change in interest income(2) $ 3,405 $ (6,646) $(3,241) $ 18,044 $ 2,927 $20,971
=======================================================================
Increase (decrease) in interest expense:
Interest bearing transaction deposits $ 245 $ (341) $ (96) $ 394 $ 156 $ 550
Savings deposits (36) (699) (735) 183 57 240
Money market deposits 1,759 (3,218) (1,459) 447 1,521 1,968
Time deposits 1,023 (405) 618 6,404 2,039 8,443
Federal funds purchased and repurchase
agreements (869) 98 (771) 793 71 864
Other (2,223) (160) (2,383) 2,213 354 2,567
Long-term debt (742) 327 (415) 926 (2) 924
Company obligated mandatorily
redeemable preferred securities 1,200 - 1,200 - - -
-------------------------------------------------------------------------
Change in interest expense $ 357 $ (4,398) $(4,041) $ 11,360 $ 4,196 $15,556
-------------------------------------------------------------------------
Increase (decrease) in net interest income(2) $ 3,048 $ (2,248) $ 800 $ 6,606 $ (1,191) $ 5,415
=======================================================================
Percentage increase in net interest income
over prior period 1.8% 14.0%
======== ========
(1) Changes due to both rate and volume have been allocated proportionally
(2) On a tax equivalent basis, assuming a federal income tax rate of 35%
FORWARD LOOKING STATEMENTS
This presentation includes forward looking statements that are intended to
be covered by the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward looking statements include but are not
limited to comments with respect to the objectives and strategies, financial
condition, results of operations and business of First Busey.
These forward looking statements involve numerous assumptions, inherent
risks and uncertainties, both general and specific, and the risk that
predictions and other forward looking statements will not be achieved. First
Busey cautions you not to place undue reliance on these forward looking
statements as a number of important factors could cause actual future results to
differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward looking statements.
These risks, uncertainties and other factors include the general state of
the economy, both on a local and national level, the ability of First Busey to
successfully complete acquisitions, the continued growth in the geographic area
in which the banking subsidiaries operate, and the retention of individuals who
currently are very important in the management structure of First Busey.
25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of change in asset values due to movements in
underlying market rates and prices. Interest rate risk is the risk to earnings
and capital arising from movements in interest rates. Interest rate risk is the
most significant market risk affecting the Corporation as other types of market
risk, such as foreign currency exchange rate risk and commodity price risk, do
not arise in the normal course of the Corporation's business activities.
The Corporation's subsidiary banks, Busey Bank and Busey Bank fsb, have
asset-liability committees which meet at least quarterly to review current
market conditions and attempt to structure the banks' balance sheets to ensure
stable net interest income despite potential changes in interest rates with all
other variables constant.
The asset-liability committees use gap analysis to identify mismatches in
the dollar value of assets and liabilities subject to repricing within specific
time periods. The Funds Management Policy established by the asset liability
committees and approved by the Corporation's Board of Directors establishes
guidelines for maintaining the ratio of cumulative rate-sensitive assets to
rate-sensitive liabilities within prescribed ranges at certain intervals. A
summary of the Corporation's gap analysis is summarized on page 21.
The committees do not rely solely on gap analysis to manage interest-rate
risk as interest rate changes do not impact all categories of assets and
liabilities equally or simultaneously. The asset-liability committees
supplement gap analysis with balance sheet and income simulation analysis to
determine the potential impact on net interest income of changes in market
interest rates. In these simulation models the balance sheet is projected out
over a one-year period and net interest income is calculated under current
market rates, and then assuming permanent instantaneous shifts in the yield
curve of +/- 100 basis points, 175 basis points and + 200 basis points.
Management measure such changes assuming immediate and sustained shifts in the
Federal funds rate of 100 and 200 basis points, both upward and downward, and
the corresponding shifts in other rate indices based on their historical changes
relative to changes in the Federal funds rate. The model assumes asset and
liability balances remain constant at December 31, 2001 balances. The model
uses repricing frequency on all variable-rate assets and liabilities. The model
also uses a historical decay rate on all fixed-rate core deposit balances.
Prepayment speeds on loans have been adjusted up and down to incorporate
expected prepayment in both a rising and declining rate environment. Utilizing
this measurement concept the interest rate risk of the Corporation, expressed as
a change in net interest income as a percentage of the net income calculated in
the constant base model, due to changes in interest rates at December 31, 2001,
was as follows:
Basis Point Changes
-----------------------------------
-175 -100 +100 +200
-----------------------------------
Percentage change in net interest income due to an
immediate change in interest over a one-year period 2.10% 1.51% (0.27%) (0.63%)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are presented beginning on page 32.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant. Incorporated by reference is the
information set forth on pages 4-6 of the 2001 Proxy Statement.
(b) Executive Officers of the Registrant. Please refer to Part I of this
Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference is the information set forth on pages 9-11 of the
2001 Proxy Statement (except the information set forth in the sections "Report
of the Compensation Committee on Executive Compensation").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference is the information set forth on page 8 of the
2001 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference is the information set forth on page 13 of the
2001 Proxy Statement.
27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit Description of Exhibit Sequentially
Number Numbered Page
- --------------------------------------------------------------------------------------------------------------
3.1 Certificate of Incorporation of First Busey Corporation (filed as Appendix B to First
Busey's definitive proxy statement filed with the Commission on April 5, 1993
(Commission File No. 0-15950), and incorporated herein by reference)
3.2 By-Laws of First Busey Corporation (filed as Appendix C to First Busey's definitive
proxy statement filed with the Commission on April 5, 1993 (Commission File No.
0-15950), and incorporated herein by reference)
10.1 First Busey Corporation 1993 Restricted Stock Award Plan (filed as Appendix E to
First Busey's definitive proxy statement filed with the Commission on April 5,
1993 (Commission File No. 0-15950), and incorporated herein by reference)
10.3 First Busey Corporation Profit Sharing Plan and Trust (filed as Exhibit 10.3 to First
Busey's Registration Statement on Form S-1 (Registration No. 33-13973), and
incorporated herein by reference)
10.4 Mortgage on County Plaza Building (filed as Exhibit 10.4 to First Busey's
Registration Statement on Form S-1 (Registration No. 33-13973), and incorporated
herein by reference)
10.7 First Busey Corporation Employee Stock Ownership Plan (filed as Exhibit 10.7 to
First Busey's Annual Report on Form 10-K for the fiscal year ended December 31,
1988 (Registration No. 2-66201), and incorporated herein by reference)
10.8 First Busey Corporation 1988 Stock Option Plan (filed as Exhibit 10.8 to First
Busey's Annual Report on Form 10-K for the fiscal year ended December 31, 1988
(Registration No. 2-66201), and incorporated herein by reference)
10.9 First Busey Corporation 1999 Stock Option Plan (filed as Appendix B to First
Busey's definitive proxy statement filed with the Commission on March 25, 1999
(Commission File No. 0-15950), and incorporated herein by reference)
21.1 List of Subsidiaries of First Busey Corporation
23.1 Consent of Independent Public Accountants
28
FINANCIAL STATEMENT SCHEDULES
Financial statement schedules not included in this Form 10-K have been omitted
because they are not applicable for the required information shown in the
financial statements or notes thereto.
FIRST BUSEY CORPORATION INDEX TO FINANCIAL STATEMENTS
Page
-----
Independent Auditor's Report 33
Consolidated Balance Sheets 34
Consolidated Statements of Income 35
Consolidated Statements of Stockholders' Equity 36-38
Consolidated Statements of Cash Flows 39-41
Notes to Consolidated Financial Statements 42-72
Management Report 73
Independent Accountant's Report 74
REPORTS ON FORM 8-K
No reports on Form 8-K have been filed for or on behalf of First Busey
Corporation during the last quarter of 2001. On April 17, 2001, the Corporation
filed a report on Form 8-K dated April 16, 2001, relating to Vision 2010, First
Busey Corporation's strategic plan, which was presented at the Corporation's
annual shareholder meeting held April 16, 2001.
FORM S-8 UNDERTAKING
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the registrant's Registration Statement on Form
S-8 File No. 33-30095.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of the expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Urbana,
Illinois on March 16, 2001.
FIRST BUSEY CORPORATION
BY //DOUGLAS C. MILLS//
--------------------
Douglas C. Mills
Chairman of the Board, President,
Chief Executive Officer
29
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on March 16, 2001.
Signature Title
//DOUGLAS C. MILLS// Chairman of the Board, Chief
---------------------- Executive Officer
Douglas C. Mills (Principal Executive Officer)
//BARBARA J. JONES// Chief Financial Officer
---------------------- (Principal Financial Officer)
Barbara J. Jones
//JOSEPH M. AMBROSE// Director
----------------------
Joseph M. Ambrose
//SAMUEL P. BANKS// Director
----------------------
Samuel P. Banks
//T.O. DAWSON// Director
----------------------
T. O. Dawson
//VICTOR F. FELDMAN// Director
----------------------
Victor F. Feldman
//KENNETH M. HENDREN// Director
----------------------
Kenneth M. Hendren
//E. PHILLIPS KNOX// Director
----------------------
E. Phillips Knox
//BARBARA J. KUHL// Director
----------------------
Barbara J. Kuhl
//P. DAVID KUHL// Director
----------------------
P. David Kuhl
//V. B. LEISTER, JR.// Director
----------------------
V. B. Leister, Jr.
//LINDA M. MILLS// Director
----------------------
Linda M. Mills
//EDWIN A. SCHARLAU// Director
----------------------
Edwin A. Scharlau II
//DAVID C. THIES// Director
----------------------
David C. Thies
//ARTHUR R. WYATT// Director
----------------------
Arthur R. Wyatt
30
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
31
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONTENTS
- --------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT 33
- --------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets 34
Consolidated statements of income 35
Consolidated statements of stockholders' equity 36 - 38
Consolidated statements of cash flows 39 - 41
Notes to consolidated financial statements 42 - 72
- --------------------------------------------------------------------
INTERNAL CONTROL REPORTS
Management Report - Effectiveness of the Internal Control 73
Independent Accountant's Report 74
- --------------------------------------------------------------------
32